WEEKEND INSIGHTS: Nothing Is a Slam Dunk When It Comes To Tax

While many tax practitioners are focused on tax season, others may be focused on a different one: tournament season.

The NCAA Division I men’s basketball tournament, played annually since 1939, tipped off this week. The occasional Cinderella story has made the tournament a must-watch in March as 68 teams—including some that you may not know—compete in seven rounds for the national championship.

The NCAA Division I women’s basketball tournament, played annually since 1982, begins on Sunday, March 21. The tournament features 64 teams vying for the national title.

Quick Numbers Trivia

Do you know which men’s team won the most tournaments? And which women’s team has won the most tournaments?
(The answers can be found at the bottom.)

Our Roundup

I’m a big fan of March Madness and the tournament season—and not just because I grew up in ACC country. There are a lot of great lessons that you can learn from basketball—and many of those ring true when it comes to tax, too. Here’s a look at what we’ve learned this week.

Enforcing the rules is key. How many times have you yelled at a referee while watching a game? Consistent enforcement of the rules can be a game-changer. That’s true in tax, too. One way that states keep playing fields level is to allow taxpayers to blow the whistle when the rules aren’t being followed. In 2010, New York amended its False Claims Act to enable whistleblowers to sue certain individual and corporate defendants. Other states are considering similar legislation. Randall Fox of Kirby McInerney LLP debunks some common fallacies regarding the New York law. Read: Five Tax Whistleblowing Fallacies

Home court can be an advantage. To keep teams level, the NCAA follows strict rules about where games are played during the tournament. When it comes to tax, states have strict rules about where a taxpayer can call home. And as many taxpayers who currently reside in high-tax states consider relocating to low or no-tax states, Brad Galbraith of Galbraith PLLC outlines four fundamentals to make a clean break from your current domicile. Read: Considering Changing Your Domicile? The Four Fundamentals to Successfully Changing Your Domicile

Working as a team can make a difference. Some of the best individual basketball players in the world have never won an NCAA trophy: that’s because winning is a team effort. You shouldn’t rely on just one player. Yair Holtzman and Gleb Gorkhover of Anchin argue that a key lesson of the Covid-19 pandemic is the need to reevaluate the U.S. supply chain to not be overly dependent on any one country. To grow STEM and manufacturing, it’s important to support R&D, but eliminating the immediate expensing option discourages taxpayers from keeping R&D activities in the U.S. Read: Changes to R&D Expensing—Unpleasant Surprise to Taxpayers and Great Opportunity for Bipartisanship

Pay attention when it matters. In 1993, Michigan’s Chris Webber, trapped in a corner with a 2-point lead and 11 seconds on the clock, called a time-out against UNC. The problem? Michigan didn’t have any time-outs to give. That mistake cost his team the game. Access to information when it matters the most is essential: that’s why traditional value-added tax compliance mechanisms that rely on slower data reporting find it more difficult to detect and stop fraudulent transactions. Aleksandra Bal, an indirect tax specialist based in the Netherlands, notes that under the emerging invoice clearance model, tax administrations can receive real-time data—and the ability to examine that data promptly makes a difference. The invoice clearance model is slowly gaining popularity in Europe—will the trend continue? Read: European VAT E-invoicing Debate—Will Everyone Follow the Italian Example?

You can learn from the winners—and the losers. It’s true that you can learn a lot from a winning team, but you can win just as much from a losing team (see again Michigan above). The same is true for tax: states can learn a lot from watching how successful—or not—other states may be. Currently, Massachusetts is following Maryland’s lead by considering a digital advertising tax. Michael Semes of the Charles Widger School of Law at Villanova University and BakerHostetler examines three digital advertising bills introduced in the Massachusetts legislature. Read: Will Massachusetts Jump Off the Digital Advertising Tax Cliff Behind Maryland . . . Or Look Before It Leaps?

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From the Archive

We don’t just focus on the rules at tournament time or tax time. The rules have always mattered.

Catherine Dahl of Beanworks took a look at how those that don’t play by the rules at work can cause a whole team to fail: accounts payable fraud is a silent threat faced by many companies. Understanding what that looks like and what to do if you see it is crucial. Read: Accounts Payable Fraud: Where to Spot It, and How to Prevent It

Of course, the rules are often changing. The Anti-Money Laundering Act of 2020 is now in effect with a host of new requirements for corporations—and applies to cryptocurrency. Lowenstein Sandler LLP attorneys Rachel Maimin and H. Gregory Baker run down who is affected and why companies need to make sure they are in compliance. Read: Anti-Money Laundering Act Requires Fresh Look at Compliance

Beyond Tax

From sports to tax, we all like water-cooler chat about our favorite subjects. The Clubhouse app, a social media audio-only platform, is growing in popularity, but companies allowing employees to use it need to be aware of potential legal issues. Baker McKenzie IP partner Kensaku Takase examines privacy, company reputation, and terms of service issues to watch. Read: Clubhouse App Is Popular, But Look Out for Legal Issues

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The Road to the Final Four isn’t the only path worth watching: Bloomberg Tax & Accounting’s American Rescue Plan Act Roadmap offers a summary of the tax provisions in the American Rescue Plan Act of 2021 (Pub. L. No. 117-2), signed into law on March 11—or what we often refer to as the 2021 stimulus package.

For even more resources, see the Federal Tax & Accounting - Coronavirus Roadmap.

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Quick Numbers Answers

Which men’s team has won the most? UCLA
Which women’s team has won the most? UConn

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This is a weekend roundup of Bloomberg Tax Insights, written by practitioners and featuring expert analysis on current issues in tax practice and policy.

We’d like to hear what you think about any of our articles or the newsletter. Here’s our email: TaxInsights@bloombergindustry.com.

The articles featured represent a handful of the many Insights published each week. For a full archive of articles, browse by jurisdiction at Daily Tax Report, Daily Tax Report: State, Daily Tax Report: International, Transfer Pricing Report, and Financial Accounting.